Modern Macroeconomics.pdf

654 Modern macroeconomicsit is upon the sea-coast, and along the river banks of navigable rivers, that industryof every kind naturally begins to subdivide and improve itself … All the inlandparts of Africa, and all that part of Asia which lies any considerable way north ofthe Black and Caspian seas … seem in all ages of the world to have been in thesame barbarous and uncivilised state in which we find them at present.Recently, Rappaport and Sachs (2003) have shown that economic activity inthe USA is overwhelmingly concentrated along or near its ocean and GreatLakes coastal regions. As Adam Smith recognized, proximity to coastal regionsgreatly enhances productivity performance and the quality of life.Whilst not arguing a new case of geographical determinism, and alsorecognizing the crucial role played by economic policies, Bloom and Sachsbelieve that ‘good policies must be tailored to geographical realities’. Theyconclude that Africa will be well served if economists take advantage in theirresearch of ‘much greater cross-fertilisation’ from the accumulated knowledgein other fields such as demography, epidemiology, agronomy, ecologyand geography. Thus an important divide in the world does exist, but it is notbetween North and South; rather it is between countries located in temperatelatitudes compared to those in the tropics (see also Sachs and Warner, 1997;Diamond, 1997; Hall and Jones, 1999; Landes, 1990, 1998; Sachs, 2003).Finally in this section we draw attention to the recent research on the ‘naturalresource curse’, that is, the tendency of some countries that possess abundantnatural resources to grow more slowly than natural resource-poor countries.While democracies such as the USA, Canada and Norway tend to manage oiland other natural resources well, this is far from the case in countries governedby predatory kleptocratic autocrats where the presence of ‘black gold’ stimulatesrent-seeking behaviour, political instability and, in the extreme, civil war(see Sachs and Warner, 2001; Eifert et al., 2003). As Sala-i-Martin andSubramanian (2003) document, ‘Nigeria has been a disastrous developmentexperience’ despite having large oil resources. Successive corrupt militarydictatorships have simply plundered the oil revenues. In contrast to Nigeria, theexperience of Botswana, with its lucrative diamond resources, has been completelydifferent. The economic success of Botswana is mainly due to thequality of its governance and institutions (see Acemoglu et al., 2003).11.21 Growth in History: In Search of a Unified TheoryBefore considering the ‘ideal conditions’ for economic growth we will brieflysurvey the new and exciting literature that attempts to provide a unifiedaccount of the ‘Great Escape’ of leading world economies from ‘Malthusianstagnation’ to a regime of ‘modern economic growth’. Prominent here hasbeen the research of scholars such as Daron Acemoglu, Gregory Clark, RichardEasterlin, Oded Galor, Martin Goodfriend, Gary Hansen, Simon Johnson,